Q: Given the following data, calculate the GDP deflator for 2021: Nominal GDP (2021): $$500 Real GDP (2021): 285$$

GDP Deflator = $$\frac{500}{285} \times 100 = 175$$

Q: If the CPI in 2020 is 100, in 2021 is 175, and in 2022 is 250, what is the inflation rate from 2021 to 2022?

Inflation Rate = $$\frac{250 - 175}{175} \times 100 = 43\%$$

Question 1

Which of the following best describes the opportunity cost of attending university full-time for one year?

Accepted Answer

The value of the next best alternative foregone, including tuition, books, and potential earnings from working.

Question 2

Suppose Canada can produce either 500 computers or 5,000 tonnes of wheat per month. If Canada specializes in wheat and trades for computers, what principle is illustrated?

Accepted Answer

Comparative advantage

Question 3

In the circular-flow diagram, which of the following correctly describes the flow of money?

Accepted Answer

Firms pay households for resources in the resource market.

Question 4

If the price of hot dogs rises from $$1 to 2 $$and the quantity demanded falls from 100 to 50, what is the slope of the demand curve?

Accepted Answer

Slope = $$\frac{\Delta Q}{\Delta P} = \frac{50 - 100}{2 - 1} = -50$$

Question 5

Which statement is an example of a positive economic analysis?

Accepted Answer

Raising taxes will reduce consumer spending.

Question 6

Given the following data, calculate the GDP deflator for 2021:
Nominal GDP (2021): $$500
Real GDP (2021): 285$$

Accepted Answer

GDP Deflator = $$\frac{500}{285} 	imes 100 = 175$$

Question 7

Which of the following is NOT included in the calculation of GDP?

Accepted Answer

The value of a used car sold in the current year.

Question 8

If the CPI in 2020 is 100, in 2021 is 175, and in 2022 is 250, what is the inflation rate from 2021 to 2022?

Accepted Answer

Inflation Rate = $$\frac{250 - 175}{175} 	imes 100 = 43\%$$

Question 9

Which of the following is a limitation of GDP as a measure of economic well-being?

Accepted Answer

GDP does not account for leisure time.

Question 10

If the nominal interest rate is 5% and the inflation rate is 2%, what is the real interest rate?

Accepted Answer

Real Interest Rate = $$5\% - 2\% = 3\%$$

Question 11

Which of the following would cause the CPI to overstate the true cost of living?

Accepted Answer

Commodity substitution bias

Question 12

If Frank can produce 8 kg of meat or 32 kg of potatoes in 8 hours, what is Frank's opportunity cost of producing 1 kg of meat?

Accepted Answer

Opportunity cost = $$\frac{32}{8} = 4 kg $$potatoes

Question 13

Which country in the table has the highest Human Development Index (HDI) despite not having the highest real GDP per person?

Accepted Answer

Japan

Question 14

What does the catch-up effect in economic growth imply?

Accepted Answer

Poorer countries can grow faster than richer countries due to lower initial capital.

Question 15

Which of the following is an example of indexation?

Accepted Answer

A labor contract that automatically increases wages when the CPI rises.

Question 16

If the GDP deflator in 2020 is 100 and in 2021 is 175, what is the inflation rate measured by the GDP deflator?

Accepted Answer

Inflation Rate = $$\frac{175 - 100}{100} 	imes 100 = 75\%$$

Question 17

Which of the following is a determinant of productivity according to macroeconomic theory?

Accepted Answer

Physical capital per worker

Question 18

If a country has a high level of capital per worker, what does the production function suggest about the effect of adding more capital?

Accepted Answer

The increase in output per worker will be small due to diminishing returns.

Question 19

Which of the following is a real-world example of specialization and comparative advantage?

Accepted Answer

A professional athlete hires a chef to cook meals, allowing the athlete to focus on training.

Macroeconomics Study Guide: Principles, Trade, GDP, and Inflation

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